Many financial experts and investors would agree that there has been a considerable increase in the lack of investor trust within the traditional financial services industry. Circumstances responsible for this lack of trust include poor advice from financial advisors, advice based on flawed and/or inaccurate information, predatory sales tactics, and corrupt financial organization. The circumstances that have led to this lack of trust have contributed to a general market decline (i.e., value of funds and number of persons investing), which is a circumstance quite damaging to the equity markets and the ability of companies to raise capital (as well as damaging to a transaction and product sales-based industry—the traditional financial industry).
Product vendors and their paid salespeople generally control and often limit access to product information. Vendors typically do not want consumers to have a practical way to objectively evaluate their products in comparison with those of others. Such an ability to objectively compare (i.e., comparatively evaluate) products being offered would effectively commoditize financial products, and would adversely impact the large advertising and marketing budgets of these large product vendors. Guarding against the risk that industry products such as mutual funds are not turned into commodities was listed as one of top challenges facing the Investment Company Institute's membership, as was stated in the Jun. 20, 200 Financial Planning Journal of the Bureau of National Affairs.
Brokers and other product salespeople from the traditional financial services industry continually approach prospective and active individual investors (i.e., consumers) to solicit the consumer to buy their financial products. In general, these brokers and salespeople are approaching the consumers not necessarily because their financial products are needed or have been requested, but because that is their job. They have been hired to sell a particular organization's financial products to whomever they can.
Over the past 15 or more years, there has been a general trend within the financial services marketplace away from individual advice and guidance toward product sales. This can be envisioned in what can be described as a customer—client continuum, where at one end (i.e., the customer side) of the continuum a person is treated as a customer to be sold and, at the other end (i.e., the client side), the person is treated as a client to be advised. This trend toward the customer side of the continuum is leaving an increasingly large void at the client side of the continuum.
In an environment with ever-growing numbers of financial products (e.g., over 13,000 mutual funds and thousands of insurance products), consumers have no practical approach for obtaining information on all of these choices and no practical approach for comparing them (e.g., to see which would be best for them) even if they could obtain the needed information. This lack of knowledge is often exploited by the traditional financial services industry. Because trusted advisers of consumers (e.g., attorneys and Certified Public Accountants) lack sufficient knowledge of and information about these many financial products, even these trusted advisors are often limited in what they can do to protect their clients from having this lack of product knowledge exploited. This limitation often holds true even if they are able to obtain such information, because of the overwhelming volume of such information.
Yet another limitation of such conventional financial products and services is that related conventional processes used to select and recommend money managers are essentially “opaque”. Such processes are typically not disclosed and, often, the fiduciaries of such product and services do not request a description or explanation of the means by which these money managers are selected and/or recommended. With this process being essentially opaque, any number of abuses can occur with limited means for readily detecting them.
Most consumers of financial products would prefer the option of having a trusted adviser such as their attorney or CPA (i.e., someone without a product sales agenda) provide them with advice relating to investment decisions, and to insulate themselves from the sales pressures inherent in the traditional financial services industry. Therefore, methods and equipment configured for facilitating financial consulting services via trusted advisers who are not necessarily professionals within the traditional financial services industry would be useful.